The dollar this week rose to a 13-month high against a basket of other currencies, getting an extra boost as emerging markets have sold off on concern about contagion from Turkey and investors sought a safe haven in the USA currency.
Investors slowly edged back into buying mode but they are keeping a nervous eye on developments in Ankara after Monday's bloodletting that saw the lira hit record lows against the dollar and euro, and equity markets go into freefall on concerns Turkey's financial crisis could spread globally.
The dispute is one of several between the North Atlantic Treaty Organisation allies, including diverging interests in Syria and USA objections to Ankara's ambition to buy Russian defence systems, that have contributed to instability in Turkish financial markets.
Visitors, mainly from Saudi Arabia and Asia, formed long queues in Istanbul outside luxury stores like Louis Vuitton, Chanel and Prada after the lira took a severe hit against dollar, losing over 16 percent of its value on Friday.
The United States' top diplomat in Turkey, Jeffrey Hovenier, visited Brunson on Tuesday and called for his case - and those of others detained in Turkey - to be resolved "without delay" and in a "fair and transparent manner".
A decree by Erdogan doubled Turkish tariffs on imports of US passenger cars to 120 per cent, alcoholic drinks to 140 per cent and leaf tobacco to 60 per cent. Tariffs were also doubled on goods such as cosmetics, rice and coal. Turkey accuses Brunson of being a spy and says he was involved in an attempted coup.
In addition to the tariffs, the Trump administration has placed sanctions on Turkey's Minister of Justice, Abdulhamit Gul, and Minister of Interior, Suleyman Soylu.
Sanders said the us tariffs on steel and aluminum will not be lifted even if Brunson is freed, but suggested the sanctions against Turkish officials could eventually be removed. "The drop by the Turkish lira may have stopped, but the country is yet to tackle the fundamental problems facing it, and this has kept market sentiment subdued", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo. Also helping the currency were moves by Turkey this week to gain favor with European countries, including releasing two Greek soldiers and an Amnesty International human rights campaigner from prison.
"Rates have gone up by 10 per cent".
The lira firmed as far as 5.75 against the dollar on Wednesday and stood at 5.90 at 2058 GMT.
But to the dismay of markets, the statement gave no clear promise of rate hikes, which is what most economists said is needed.
The lira was supported by remarks from Turkish Finance Minister Berat Albayrak, who told a news conference the lira will strengthen.
The chief executive of Turkey's Akbank said the banking sector remained strong and the measures taken to support the market had started to have an impact, adding there was no withdrawal of deposits.
Meanwhile, the lawyer representing Andrew Brunson, the American pastor at the center of the dispute, renewed an appeal for his release from house arrest and for a travel ban imposed on him to be lifted. A higher court is scheduled to review the appeal.